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How Data Breaches can Ruin CX for your Startup

Vikas Agrawal | Apr 11, 2017 88 views No Comments

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Over the past few years, businesses moved from old fax machines and landlines to IP PBX systems and VoIP as the main methods of business communication. Despite the obvious advantages (speed and quality), these communication platforms are still vulnerable to hacks and breaches that can potentially place sensitive customer data into the wrong hands.

Cell phones are also not safe from the prying eyes of hackers and eavesdroppers. As the following infographic from Ooma shows, hackers can gain access to texts, phone calls, and GPS information on cell phones quite easily using vulnerabilities within the cellular infrastructure.

Who Did You Say Is Listening to My Cell Phone Calls

Therefore, no business can truly stay safe from data breaches, something that often has a negative impact on customer experience (CX).

For startups that are just starting out in the daunting world of modern business, CX is everything. Businesses can use enhanced CX to reduce the cost of acquiring new customers, making it one of the cheapest sales tools available to most startups. Still, it can become the biggest liability for startups that get it wrong, quickly sending entrepreneurs back to the drawing board and costing them precious startup capital.

And in a business world where most moving parts are determined by tech, it’s quite easy to get it wrong.

Sometimes, communication breaches can be the result of hackers testing out their skills, with no real intention to cause harm. However, in most cases, hackers and eavesdroppers often look to benefit from sensitive customer data that’s being ferried across communication channels such as VoIP.

Irrespective of the type of data breach, most brands that compromise sensitive customer data often see dwindling numbers when it comes to CX. Data breaches affect all the major metrics used to measure CX, including customer satisfaction, Net Promoter Score (NPS), and the Customer Loyalty Index (CLI). These metrics generally enable business owners to assess the impact of external factors (such as data breaches) on brand reputation and loyalty.

Brand Reputation

For both startups and established companies, data breaches often leave a negative mark on CX, which directly impacts brand reputation. No matter how small, data breaches often leave customers with a bad experience. Such customers are less likely to promote your brand, which is often disastrous for startups and small businesses without resources to pour into rebranding efforts.

For instance, Yahoo! was once the biggest company in the internet business, overshadowing the likes of Google and Microsoft in some industry sectors. However, after multiple incidents of data breaches, the company’s brand became heavily tainted, with many customers opting to terminate their accounts. A study by Experian found that brands can lose up to $332 million in value after a data breach, numbers that can potentially bury a startup before it even gets off the ground.

Customer Loyalty and Trust

Good customer experience and elements like trust and loyalty always team up to help a business stay competitive and successful. Customer loyalty and trust are always the first elements of customer relationships that are affected by a data breach. Customers who used to entrust you with sensitive information, including credit card details and addresses will always be a little hesitant when giving you that information after a data breach.

Without trust and loyalty, brands will struggle to connect with customers. Over 86% of customers will be less likely to buy from a company that fell victim to a data breach. For instance, Target struggled to come back from a disastrous data breach in 2013. The company saw losses in excess of $140 million that year, a fact that was attributed to the loss of customer trust and loyalty.

Possible Remedies

For startups and small businesses without huge sums of PR cash at their disposal, coming out of a data breach is nothing short of an uphill task. In addition to financial resources, fixing a brand’s reputation takes time, which pushes the goals and objectives of a startup further away.

There are many ways a startup can secure its communication platforms to reduce the risk of a data breach. Many involve simple solutions such as restricting access to data storage centers, using strong passwords and two-factor authentication, and encrypting end-to-end communications. Startups that deal with above average customer data should invest in enterprise-grade hardware and security software to guarantee the privacy and safety of customer data.

Startups, like any other business, must always be on the lookout for vulnerabilities that may lead to a data breach. At the end of the day, any startup looking to make it in the current business environment must put in the work to ensure customers remain happy and loyal to the brand.

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